IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : F : NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
AND
SHRI J.S. REDDY, ACCOUNTANT MEMBER
ITA Nos.3495 & 3496/Del/2013
Assessment Year : 2005-06
ITO, Vs. Pankaj Sharma Alias Yatinder Sharma,
Ward-34(4), Room No.319-D, C-44, Main Road,
3rd Floor, Vikas Bhawan, Yamuna Vihar, Ghonda,
D-Block, IP Estate, Delhi.
New Delhi. PAN : AYDPS7578N
(Appellant) (Respondent)
Assessee By : Shri G.N. Gupta, Advocate
Department By : Ms. Meenakshi Vohra, Sr. DR
ORDER
PER A.D. JAIN, JUDICIAL MEMBER:
ITA No.3495/Del/2013
This is Department's appeal for Assessment Year 2005-06, against the
order dated 26.03.2013, passed by the Ld. CIT (A)-XXVII, contending that the
ld. CIT (A) has erred in law and on facts in ignoring the Assessing Officer's
comments for the addition of ` 11,88,000/- in his order regarding non-
furnishing the complete details on account of concealed income, i.e., cash
deposits into Bank Account and accepting it as sale proceeds without any
documentary evidence.
2. The facts are that ITS information was received in this case according
to which, there were cash deposits of ` 11,88,000/- in the assessee's bank
account as on 31.03.2005. No return of income had been filed by the
ITA No.3495 & 3496/Del/2013
assessee. Notice u/s 142 (1) dated 18.09.2007 was issued to the assessee
asking him to file his return of income by 19.10.2007. However, no such
return of income was filed. Again, notice u/s 142 (1) along with show cause
notice dated 01.11.2007 was issued to the assessee asking him to explain
the source of cash deposits in his bank account and to explain why this
amount should not be added to his income as from undisclosed sources. No
reply was filed to this show cause notice. Therefore, the AO made an addition
of ` 11,88,000/- to the assessee's income by treating these cash deposits as
his income from undisclosed sources. As no return of income was filed in this
case, the income of the assessee was determined at ` 11,88,000/-.
3. By virtue of the impugned order, the ld. CIT (A) restricted the addition
made by the AO from ` 11,88,000/- to ` 1,77,000/-.
4. Challenging the impugned order, the ld. DR has contended that the ld.
CIT (A) has erred in deleting the addition correctly made by the AO; that
while doing so, the ld. CIT (A) has failed to take into consideration the fact
that it was due to the reason that no reply was furnished by the assessee to
the show cause notice issued u/s 142 (1) of the IT Act; and that the assessee
having not furnished the details of the cash deposits, the addition ought to
have been sustained.
5. The ld. Counsel for the assessee, on the other hand, has placed strong
reliance on the impugned order. It has been contended that as patent on
record, the assessee was running the business of sale of ladies' sarees, suit
fabrics through road side counter/weekly retail market; that sales were made
in cash; that the cash deposits made in the bank account throughout the
year were out of cash sales; that the sales/turnover of the assessee was
approximately of ` 80,000/- to `90,000/- per month; that the purchases were
also made in cash; that the margin of profit on the sales was in the range of
6% to 7%; that since the assessee's income for the year under consideration
was below the taxable limit, no return of income was filed; that the AO
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ITA No.3495 & 3496/Del/2013
wrongly treated the entire cash deposited in the assessee's bank account as
the assessee's income; that the AO did this on the basis of mere
assumptions and incomplete information; that out of the assessee's bank
passbook, as summoned by the AO and not available with the assessee
being old, was incomplete; that in the cash account made on the basis of
bank account and Profit & Loss Account, the net profit of the assessee stood
shown at ` 69,570/-, on a turnover of ` 9,85,870/-; that the assessment
having been framed u/s 144 of the Act, the assessee had filed submissions
along with documentary evidence before the ld. CIT (A); that the ld. CIT (A)
had forwarded the same to the AO; that in the remand report dated
18.03.2013, the AO had commented that the assessee, as per the details
filed, had deposited huge amount in his bank account on different dates,
whereas regular monthly cash sales of ` 70,000/- to 85,000/- had been
shown by the assessee; that the bank statement submitted by the assessee
was incomplete; that it appeared that the assessee had shown deposits on
estimate basis; that also appeared that the assessee was maintaining some
current account during the year under consideration; that in the summary of
bank transactions, the assessee had shown personal withdrawals of `
21,371/- only, which needed justification; that as such, the case required a
deep scrutiny after obtaining complete bank statements from the concerned
banks and other details from the assessee; and that the appeal be decided
on merits.
6. The ld. Counsel has further submitted that in response to the aforesaid
remand report, the assessee had stated before the ld. CIT (A), inter alia, that
the deposit of ` 2,50,000/- in the month of June, 2004 was out of cash sales
of ` 85,000/- for May, 2004 and the balance amount of ` 1,65,000/- was out
of cash in hand withdrawn from the bank account; that so far as regards the
deposit of ` 4,73,372/- in the month of September, 2004, it represented cash
deposits during the period from 1.7.04 to 31.9.04, i.e., a period of three
months and not of one month; that during these three months, the assessee
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ITA No.3495 & 3496/Del/2013
had made cash withdrawals of ` 6,23,672/- and had made cash sales of `
2,51,800/-; that apropos the credit entry of ` 1,07,000/-, dated 14.10.04, this
amount had been transferred to the assessee's bank account from the bank
account of a customer, against the sale of sarees and it was not a transfer
from the assessee's current account, since the assessee did not have any
bank account other than the savings bank account (affidavit to this effect
had been filed); that withdrawals of ` 21,371/- had been made from the bank
account and an amount of ` 53,400/- had been withdrawn by the assessee
from his business; and that thus, the total household withdrawals of the
assessee were of ` 74,771/-, which was sufficient for meeting the day-to-day
household expenses of the assessee's family.
7. The ld. Counsel for the assessee has further contended that the
assessee's submissions regarding cash deposits having been made out of
cash sales had not been accepted by the assessee for want of books of
account and return of income; that the assessee is not in appeal against
such action of the ld. CIT (A); that the ld. CIT (A), however, has correctly
taken into consideration the withdrawals made by the assessee in cash, for
which withdrawals, credit stands allowed to the assessee; that the ld. CIT (A)
has worked out the peak in arriving at the figure of ` 1,77,000/- and
restricting the addition to this amount.
8. We have heard the parties and have perused the material on record.
Undisputedly, no return of income had been filed by the assessee for the
year under consideration, contending that his income for the year under
consideration was below the taxable limit, being ` 69,570/- on a turnover of `
9,85,870/-. The details of the cash deposits and withdrawals in the
assessee's saving bank account with Syndicate Bank, Yamuna Vihar, Delhi,
from AY 2005-06 as reproduced by the ld. CIT (A) in the impugned order are
as follows:-
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ITA No.3495 & 3496/Del/2013
Date Particulars Debit Credit Balance
19.05.2004 Cash deposit 1,05,000 (1,05,000)
26.05.2004 Cash Withdrawal 14,000 (91,000)
26.05.2004 Cash Withdrawal 1,09,000 18,000
28.05.2004 Cash Withdrawal 50,000 68,000
31.05.2004 Cash Withdrawal 5,000 73,000
05.06.2004 Cash Deposit 2,50,000 (1,77,000)
23.06.2004 Cash Withdrawal 1,00,000 (77,000)
01.07.2004 to Cash Withdrawal 6,23,677 4,73,372 5,46,677
30.09.2004 Cash deposit 73,305
14.10.2004 Cash Deposit 1,07,000 (33,695)
16.10.2004 Cash deposit 37,628 (71,323)
06..1.1.2004 Withdrawal slip 1,00,000 28,677
09.11.2004 Cash deposit 6,000 22,677
16.11.2004 Cash Withdrawal 40,000 62,677
18.11.2004 Cash deposit 40,000 22,677
23.11.2004 Cash deposit 60,000 (37,323)
25.11.2004 Cash deposit 45,000 (82,323)
02..12.2004 Cash Withdrawal 10,000 (72,323)
08.12.2004 Cash deposit 55,000 (1,27,323)
14.12.2004 Cash Withdrawal 50,000 (77,323)
17.12.2004 Cash Withdrawal 80,000 2,677
23.12.2004 Cash Withdrawal 10,000 12,677
15.02.2005 Cash deposit 9,000 3,677
11,91,677 11,88,000
Total cash deposited during the year 11,88,000/-
Total cash withdrawn during the year 11,91,677/-"
9. Again, undisputedly, the details of the assessee's bank account for the
period from 1.7.04 to 30.9.04 were not available. The assessee had adopted
the balancing figure of deposits and withdrawals. Even the copy of the bank
account available with the AO was incomplete. The details of cash deposits
and withdrawals were filed by the assessee on the basis of this incomplete
copy of account. It was in this situation that the ld. CIT (A) restricted the
addition to ` 1,77,000/- on the basis of the material available on record. The
figure of ` 1,77,000/- represents the negative cash balance during the year,
as on 5.6.04. It was found that after accounting for the cash deposits and the
cash withdrawals, the source of the amount of ` 1,77,000/- as on 5.6.04,
remained unexplained. It was as such, that the ld. CIT (A) treated this
amount of ` 1,77,000/- as the assessee's income from undisclosed courses.
This figure of ` 1,77,000/- was seen to work out to a profit rate of 14.9% on a
turnover of ` 11,88,000/-. This was found to be much higher than the
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ITA No.3495 & 3496/Del/2013
presumptive rate of net profit applicable in terms of the provisions of Section
44AF of the Act.
10. The department has not been able to successfully refute before us the
above facts duly taken into consideration and discussed in detail by the ld.
CIT (A) in the impugned order. We find the approach of the ld. CIT (A) in
adopting the peak of the deposits and withdrawals during the year, to be
well justified. The same is, thus, sustained, rejecting the grievance of the
department.
11. In the result, the appeal filed by the department, for the above
discussion, stands dismissed.
ITA No.3496/Del/2013
12. This is Department's appeal for Assessment Year 2005-06, against the
order dated 26.03.2013, passed by the Ld. CIT (A)-XXVII, contending that the
ld. CIT (A) has erred in deleting the penalty of ` 3,14,754/- correctly levied on
the assessee u/s 271 (1)(c) of the IT Act.
13. Pursuant to determining the assessee's income at ` 11,88,000/- on
account of unexplained cash deposits in his bank, the AO levied penalty of `
3,70,048/-, being 100% of the tax sought to be evaded on the alleged
concealed income of ` 11,88,000/-. The ld. CIT (A) held that since no return
of income had been filed, despite the assessee having taxable income as
determined by the AO, the whole of the income determined by the AO
represented the concealed income of the assessee and that therefore,
penalty u/s 271 (1)(c) of the IT Act had rightly been imposed on the
assessee. The ld. CIT (A), however, directed the AO to recomputed the
amount of penalty after giving effect to the appeal order in the assessee's
case in the quantum matter, wherein the undisclosed income of the assessee
was restricted to ` 1,77,000/-.
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ITA No.3495 & 3496/Del/2013
14. While dealing with ITA No.3495/Del/2013, i.e., the quantum appeal, we
have upheld the action of the ld. CIT (A) in restricting the undisclosed income
of the assessee to ` 1,77,000/-. In view thereof, we hold that the ld. CIT (A)
has rightly directed the AO to re-compute the amount of penalty after giving
effect to the CIT(A)'s appeal order in the quantum case. The penalty to the
extent of ` 3,14,754/- has, therefore, in our considered opinion, been rightly
deleted. To this extent, the provisions of Section 271 (1)(c) of the Act are not
attracted.
15. For the above discussion, the department's appeal in this matter is
also dismissed.
16. In the result, both the appeals filed by the department are dismissed.
The order pronounced in the open court on 23.05.2014.
Sd/- Sd/-
[J.S. REDDY] [A.D. JAIN]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated, 23rd May, 2014.
dk
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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